According to the New York Times's preview of the report, the OTS believed WaMu was "fundamentally sound" until Feb. 2008, when it downgraded it to "exhibits some degree of supervisory concern," and then, four days before WaMu's collapse that September, OTS downgraded it to "unsafe and unsound." Sounds like OTS was really paying attention.

The FDIC apparently had a better grip on what was happening, but didn't act effectively on its knowledge. Ongoing Congressional hearings will focus on WaMu starting Tuesday.

And Corporate Counsel has a story that further undermines confidence in the regulators. Stephen Friedman was the Chairman of the Board of the New York Federal Reserve and a Board Member of Goldman Sachs during the peak of the financial meltdown. In Dec. 2008 and Jan. 2009, after the Fed decided to use bailout funds to repay AIG's counterparties -- a move that sent $13 billion of taxpayer money to Goldman Sachs -- but before the public knew Goldman was getting the money, Chairman Friedman bought $4 million in Goldman stock. That stock is now worth $9.4 million.

The article notes that, at the time, the purchase was against Federal Reserve policy, and only belatedly did Friedman receive a waiver from the policy, over significant misgivings of the other New York Fed board members. Policy and waiver aside, Friedman's actions seem awfully close to insider trading. Sure, the bailout of AIG was public in Sept. 2008, but the public wasn't told what Goldman got until March 2009.